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The telecommunications company providing telephone and broadband services to the Department of Hawaiian Home Lands and its beneficiaries has laid off its employees and terminated its services despite orders from state regulators and the governor to stay in business through June.

At least 100 homesteads and businesses throughout the state have been without internet since at least June 8 when Sandwich Isles Communications abruptly ended services that weekend for its customers, according to records filed Friday afternoon in response to subpoenas from the Public Utilities Commission. Molokai has been particularly hard hit.

The PUC has set a hearing for Monday where it will determine if Sandwich Isles violated any laws. Penalties could include fines or the suspension or revocation of Sandwich Isles operating licenses, according to state law.

The PUC can also determine that Sandwich Isles is allowed to discontinue its services, propose a date for when Sandwich Isles can discontinue its services or force Sandwich Isles to continue its services unless it demonstrates “that a reliable competitive alternative exists at reasonable rates.”

These latest proceedings at the PUC may be the death knell for a company that has slipped into financial ruin after struggling for years to provide reliable services to Native Hawaiian residents and businesses on areas owned by DHHL.

Lawyers for the state’s consumer advocate will argue that Sandwich Isles violated state and federal laws when it cut services last week. Al Hee, the company’s founder who went to prison in 2016 on fraud charges but recently took over as president, plans to represent the company at the hearing.

Hee is scheduled to be the only witness called to testify by both the consumer advocate and himself.

Sandwich Isles, which operates under a nearly 30-year-old agreement with DHHL, is supposed to provide services to residents who couldn’t connect with other telecommunications companies when their lots were developed in the mid-1990s.

It got millions of dollars in federal funds to lay down lines in rural areas. In 2020, the company was ordered to start paying back more than $130 million worth of loans that it defaulted on. The federal government foreclosed on the company’s assets. 

Hawaiian Telcom bought the terrestrial and undersea fiber optic infrastructure owned by Sandwich Isles’ affiliate Paniolo Cable Co. out of bankruptcy.

Correction: A previous version of this story incorrectly identified the network as belonging to Sandwich Isles.

In May, Hawaiian Telcom submitted the highest bid for the remaining conduits owned by Sandwich Isles. However, Sandwich Isles still owns the wiring and equipment that is necessary to continue services to its customers.

Hee and his attorney have argued in this case and others that DHHL’s actions in recent years to open broadband competition on homelands to companies like Spectrum and Hawaiian Telcom as well as the recent sale of Sandwich Isles’ remaining assets to Hawaiian Telcom have eaten away at the rural carrier’s revenues.

In late May, Sandwich Isles started telling its customers that it would discontinue its services on June 1. One day before that was set to happen, Gov. Josh Green issued an emergency order barring Sandwich Isles from shuttering its services. The PUC simultaneously issued a violation notice and opened an investigation into the company. State regulators also ordered Sandwich Isles to continue its services

But the despite those orders, Sandwich Isles cut its services just one week later.

Sandwich Isles said it would disconnect all phone and internet service on June 8, according to a letter sent to its customers on June 5. The company wrote that it tried to keep its services going that week “in the hopes that the Governor’s proclamation and the order filed by the Public Utilities Commission (PUC) would lead to a solution.”

The company said it tried to help with a transition plan to a new carrier but hasn’t been able to communicate with DHHL.

“Due to zero communication from DHHL and their lack of support of SIC, we simply cannot afford to continue to provide you with service,” the company said.

During that June 8 weekend, DHHL started receiving reports of service outages on Molokai, according to documents filed with the PUC. Businesses in Kaunakakai that were not on homelands were also affected. DHHL offices on Maui, Molokai and the west side of Hawaii island also reported drops in service. As of last week, two charter schools that operate on homelands were also without internet.

Hee said in an email last week to state officials that he has recently taken over as president and that all Sandwich Isles employees have either been terminated or found jobs elsewhere.  

Sandwich Isles “lost more money trying to comply with the PUC’s order,” Hee wrote in the email.

In a separate letter to DHHL Chair Kali Watson, Hee wrote that Sandwich Isles needed to discontinue its services because it has “simply run out of money.”

The department believes Sandwich Isles brought this situation on itself.

In a memo to the PUC, DHHL’s attorney Kevin Herring wrote that Sandwich Isles could have started winding down its services four years ago, but chose not to.

“While SIC may be out of money and assets, that does not excuse its willful non-compliance,” Herring wrote.

DHHL is asking that the PUC approve a process to supervise the transfer of Sandwich Isles’ services to a new interim service provider while DHHL makes repairs to restore services in areas that have already lost phone and internet service. The department has started deploying wireless internet hotspots to areas affected by the outages.

The department submitted nearly 2,000 pages of documents in response to the PUC’s subpoenas including communication with Sandwich Isles, beneficiaries and information regarding service outages.

Hee struggled to answer some of the PUC’s questions in response to a subpoena.

The PUC asked for the number of Sandwich Isles customers and wanted a breakdown of where they are geographically. Hee wrote that Sandwich Isles does not have a customer count.

The PUC also asked Sandwich Isles for correspondence with its customers this month who had inquiries regarding terminated services. Instead, Hee responded with copies of emails he sent to the Hawaiian Homes Commission in April 2022 that were forwarded to customers on a Sandwich Isles’ email list.

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.